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We import goods from an overseas related party; what materials must we keep under the Customs Act?

Our company has an overseas headquarters, so we regularly import raw materials and finished products from the headquarters and overseas related parties. Recently, I have become curious about what additional materials we should keep in preparation for a customs tax assessment review or a customs investigation. I would like to know whether there are documents required in connection with related-party transactions beyond a simple import contract, and also whether there are any disadvantages under the Customs Act if we do not properly keep or fail to submit the materials.

Customs Act

Answer to Related Inquiry

Author: 김국일

Under Article 37-4 of the Customs Act, where goods are imported from an overseas related party, strengthened obligations to keep and submit materials are imposed compared with ordinary import transactions.

In addition to the import declaration documents under Article 12 of the Customs Act and the like, the following materials must be kept and submitted at the time of the tax assessment review.

1. The status of cross-shareholdings among related parties

2. The calculation details of imported goods prices and internal price determination materials

3. International transaction pricing policy materials

4. Import contracts and cost-sharing agreements

5. Contracts related to royalties, technology introduction fees, and commissions

6. Advertising and sales support contracts

7. Accounting treatment standards and methods

8. The audit reports and annual reports of the overseas related party

9. Details of overseas payments and supporting documents

10. The integrated corporate report and individual corporate report under Article 33 of the Enforcement Decree of the Adjustment of International Taxes Act

In addition, the integrated corporate report and individual corporate report under the Enforcement Decree of the Adjustment of International Taxes Act may also be subject to submission at the time of the tax assessment review.

If you do not keep these materials or do not submit them at the request of customs, sanctions under the Customs Act may arise.

Where declaration documents are not kept in violation of Article 12 of the Customs Act, a fine not exceeding 20 million won, and even in the case of negligence, a fine not exceeding 3 million won may be imposed, and where the import declaration certificate is not kept, an administrative fine not exceeding 1 million won is imposed.

In addition, where the requested materials are not submitted or false materials are submitted, an administrative fine not exceeding 100 million won may be imposed, so caution is required.

Because related-party import transactions are highly likely to lead to a tax assessment review, it is important to systematically manage the materials required under the Customs Act in advance and to check legal risks through the advice of a customs attorney.